Tag: Mutual Fund

It was almost a decade from now when the HDFC small-cap fund was introduced on 10th April 2008. Well, at that time it was named as Morgan Stanley ACE fund and a multi-cap scheme was followed. But in mid-2014, Morgan Stanley MF was procured by HDFC Mutual Fund, that time the investments scheme were changed and the scheme was renamed as HDFC small and mid-cap fund. Again in November 2016, it was rechristened as HDFC small-cap fund.

The fund invests primarily in small-cap corporations and pursues to deliver long-term capital income. CMFR (Crisil Mutual Fund Ranking) rated it as the number one in the small-cap funds’ list for the first quarter of 2018. The manager of the fund since June 2014 is Mr. Chirag Setalvad who has more than 20 years of experience.

The fund’s AUM (Assets under Management) of the month-end arose more than 4 times which is ₹4578 Crores in May’18 from ₹909 Crores in June’15.Also, the fund has provided much higher average daily returns in more than last three years in comparison to the standard and rivals and with lesser volatility.

The fund has constantly surpassed the standard (BSE 200 TRI) and the listing (illustrated by funds placed in the small-cap funds listing in Crisil MF rank) overall dragging phase under analysis.

Risk analysis

Alpha

7.69

Beta

0.95

Downside Risk

18.91

Info Ratio Rel.

1.99

Jensens Alpha

7.34

Max. Drawdown

-18.11

Max Gain

36.70

Max Loss

-18.11

Negative Periods

11

Positive Periods

25

r2

0.96

Relative Return

7.17

Return

18.24

Sharp

0.62

Sortino

0.59

Tracking Error

3.60

Trenyor

11.25

Volatility

17.43

Portfolio analysis

Since last 3 years, the fund’s small-cap provided an average of 61.04%. The small-cap allocation has made a hike since November’16 after the fund was rechristened as a small-cap fund. Talking about sectoral level, in the last three years there were 5 primary sectors which contributed approx. 47% of the fund’s equity portfolio. During that phase, the main sector allocations involve construction projects, pharma companies, banks, industrial products and auto auxiliaries.

One of the major contributors during that phase was VIP industries, Balkrishna industries, Aarti industries and KEC international.

In this listing, Dilip Buildcon has been the biggest contributor to the fund’s achievement.Up to May’18 Industrial products has been the highest component of the fund’s equity portfolio which was 16.2% then software-13.12%, banks-8.3%, auto auxiliaries-6.75% and pharma industries-5.3% respectively.

The fund has invested in 124 stocks in the last 3 years, of which 22 were constantly clutched. The biggest contributors to the fund’s achievement between the constantly held stocks were Banco products, Swaraj Engines, NIIT technologies, Kalpataru power transmission and Carborundum Universal.

Note : Past performance of fund does not guarantee the future returns.

Disclaimer:No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here.

“Active fund managers in India have convincingly outperformed benchmarks over 5, 10 and 20-year time frame.” The industry of mutual fund was open to private sector encounter for the first time in 1993.

The former Kothari Pioneer Mutual Fund which is named as Franklin Templeton MF introduced Prima & Blue chip fund on 1st Dec.’93. Initiating from these two funds, there were 9 equity fund schemes obtainable in India. A total of six schemes were introduced in 1993 and two were introduced before ’93. to develop the assets under their enclosure to nearly ₹7 lakh crores from ₹48,000 crores, it takes almost 20 years of efficiently period.

Indian MFs have multiplied their assets to more the ₹23 lakh crores in the past 5 years without any exertion. Almost ₹70,000 crores of the yearly MF Flows now floats in through the SIP (Systematic Investment Plan). These days the SIPs capture prime recall for the new and upcoming investors but competing with the old preferences like insurance plans and bank deposits have never been such easy-going.

For the current position of the industry, the excellent ones are the asset managers, advisors, and the regulators. The credit must go to these three positives of the MF industry. There was a time when the fund managers have struggled in the developed markets to keep it and match up with the markets, active fund managers in India have definitely outperformed benchmarks over 5, 10 and 20-year time frames. The 10-year category returns on sincerely organized small-cap, mid and large-cap funds are ahead on the Nifty50, Nifty Midcap100 and Nifty Small cap 100 by compelling margins of 100, 300 and 700 basis points even in spite of recent fluctuations. The supremacy of the open-end funds has also made it clear that the worst performing ones lose assets to the good performing ones.

By continuously prioritizing investor’s concerns, SEBI has shown that it’s a strong regulator. SEBI has played a crucial role in establishing MFs by the’ advanced tightening of its rules on revelation, efficient exposures, and governance.

Despite the outstanding performance of the MF industry, there are some misses that should be developed. Indian MF industry is mainly marketed on their current 1-year, 3-year, and 5-year records. According to the sources, approx. 55% of retail investors had only 2-year holding period on equity funds and that time is too less and barely provide the benefits of investing in equity. A large number of domestic equity funds exhibit portfolio turnover ratios of more than 50% that means minimum half stocks are replaced within a year. The industry must shift the goal-line to more long-term performance course to entice better fund managers and more stable assets. The salary of fund managers must benefit into constancy and tenure, and not just to master the 1 to 3-year rankings.

In India, Equity MFs are still categorized on the basis of a sole-dimensional market-cap viewpoint which is an idea introduced in 1993 by the Kothari Pioneer MF. Debt funds are even adapted more to corporate treasuries than the new and retail investors. Also, ETFs and good passive funds are lost in action while there is a group of many active funds. In the past years, new launches have focused around common closed-end funds, thematic funds or equity saving funds, intended to utilize tiny loopholes in constantly changing tax laws. Rather than, investors will like to invest in 10 to 15-year debt funds and pension funds that provide tax-efficient income or ETFs with micro-cap or wide-market portfolios.

After putting barriers on liquidity and declaration with their open-end funds MFs have been reverting recently, by turning out series after series of closed-end funds with indefinite instruction. Close-end schemes at 1002 are numerous than open-end schemes i.e. 811.

It can be strange to worry about diminishing competition in an industry with about 2000 schemes and 40-odd players. But the reality is that the industry is rapidly becoming a horse race. Talking about today, the topmost 5 AMC in the industry manage almost 57% of the assets. Moreover, this listing has rarely any changes in the past 10 years with large AMCs easily growing larger.

In addition, it seems to be a far better option that MF industry self-regulates itself on these particular outlooks. Without remaining awaited for the SEBI to add some more pages to its already long rule-book.

Note : Past performance of fund does not guarantee the future returns.

DISCLAIMER

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here.

Axis Long Term Equity Fund is an ELSS (equity-linked savings scheme) fund managed by the AMC Axis Mutual Funds. It is designed to provide subscribers with tax savings benefits under section 80C of the IT Act 1961. This fund invests exclusively in equity and equity-linked instruments such that it features a high degree of growth with the potential of providing high returns to those investing the Axis Long-Term Equity Fund scheme. Like any other equity mutual fund, the Axis Long-Term ELSS is traded in stock markets, and its unit price is subject to daily change.

Fund features:

This ELSS mutual fund is an open-end scheme, i.e. investors are free to invest in it or liquidate it as per their investment requirements. Additionally, it is an equity-linked savings scheme (ELSS) hence it provides tax deduction benefits under section 80C with the mandatory 3-year lock-in requirement. It is, however, important to note that investors can choose to remain invested in the scheme beyond the mandatory 3 year lock-in period to make his/her wealth grow even further.

Risk Level:

The expected level of risk undertaken by an investor of this key mutual fund is classified as moderately high due to its high equity exposure. However, this does increase the chances of potentially high returns for those remaining invested in the scheme for a longer tenure.

As mentioned earlier, this scheme is designed to provide income and long-term capital appreciation to investors by investing in a wide range of equity and equity-linked investments. As a rule, this ELSS mutual fund from Axis has focused on organizations that have robust growth prospects or have proven performance track record in their area of expertise. The fund invests in company equities across key segments such as large cap, mid cap and small cap irrespective of the sector the companies belong to.

Performance of the fund so far:

The fund has surpassed the benchmark index (12.07%) and the bracket average i.e., 13.66% providing a return of 19.22% within 7 years. The fund has made an outstanding track record of outshining since the initiation.

Annual performance (in percentage):

The fund has provided exceptionally good performance beyond time periods.

The fund has appeared to be more vigorous in this year, overcoming all its peers easily after a small drop in the return profile in past two years. The fund manager’s uncompromising attention on the standard of underlying portfolio and leaning towards large caps has improved it to deliver outperformance between the deficiencies in the broader market. The fund takes a top-heavy approach with a huge position in its uppermost picks even it constantly runs a compact portfolio with a gush in its asset base. It also acquires a high benchmark skeptic perspective, comfortable in taking remarkably higher exposure about an index. With its big skew to towards financials, this adds a portion of aggression to the fund even its firm stance on retaining the quality. A supportable pick-up in return profile will show its long-term achievements.

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here.

Mutual funds are now 21% of the bank deposits. On the other hand, the Indian mutual fund’s industry still has much to gain on with its worldwide squint regarding of the brisk and massive growth in the recent times.

In spite of a massive rise in the equity market and a stable inflow through the SIPs (Systematic Investment Plans), mutual funds had become successful in enticing the trade investors as their equity AUM (Assets under Management) rated for 8% of the bank deposits in the previous fiscal year. According to the data obtained by the RBI, the equity assets of the mutual funds were ₹9.3 lakh crores in averse to ₹115 lakh crores in bank deposits by March end.

Progressively, the latest data reveals that the mutual funds are getting well-liked among the investors. The AUM of the mutual funds was counted at 10.44% of the total bank deposits by March 2013. This percentage has increased to 17.44% in March 2017 and then gains a hike to 21% in December 2017. In past 4 and half years, the mutual fund industry has added an amount of ₹ 14.25 lakh crores meanwhile ₹33.79 lakh crores increased the bank deposits.

Also, mutual funds AUM stances at 18% in March 2017, on the other side this ratio was 100% in the US. A huge growth possibility can be seen in India in terms of population dispersion and increasing per capita income from ₹75,000 to ₹2.5 lakhs. The mutual fund industry has attempted several campaigns like ‘Jan Nivesh’ and ‘Mutual Fund Sahi Hai’ to attract the investors towards MF. Also, in the past six years, the mutual fund industry has acquired the growth of 20%. Mutual fund AUM will touch ₹95 lakh crores by 2025 if the industry gets to attain this rate.

Source– RBI, IRDAI (Insurance Regulatory and Development Authority of India)

One of the biggest macroeconomic improvements in MFs is AUM to GDP ratio. Vast change can be seen between the percentage of GDP in FY 2000 and the GDP of FY 2018. Where the GDP was 5.6% in FY 2000, now it has risen to 12.8% and this growth indicates the huge growth potential of the MF industry.

The chart shows that developed countries like the US (101%), France (76%), Canada (65%) and the UK (57%) have listed high-level mutual fund penetration. Similarly, the emerging countries like South Africa (49%) and Brazil (59%) have an outrageous allocation in mutual funds in comparison to India. The distribution of India indicates a significant scope for growth as the average of the mutual fund penetration of the world stances at 62%.

This chart shows that the highest allocation percentage of equity mutual fund AUM to market cap ratio is of Germany that is 51%, the US stands second with 41%. While India has only 4% allocation and such low penetration suggests that there is a steady growth prospect for the MF industry, especially in equity mutual funds.

With the stock market going through volatile times, many fund managers seem to be moving to cash. According to data from Ace Mutual Fund database, more than 20 diversified equity funds currently have a cash allocation of above 10 percent in their portfolios. While it may seem like a safe call, Many fund manager say that it should depend on the fund’s mandate. Many fund houses have in-house rules that forbid their fund managers from going into cash above five-six percent.

To reduce the mid-cap pain

The ongoing correction in mid- and small-cap stockshas forced many fund managers to seek refuge in cash. “Many funds with a mid- and small-cap mandate and even others that had taken large exposure to these stocks during the rally have been hit in a big way. These funds have moved into cash to reduce the pain from the correction.” Funds that have booked timely profits in mid- and small-cap stocks too have been left holding high levels of cash.

Many funds are still adjusting their portfolios to comply with Sebi’s new categorisation norms. If, for instance, large-cap funds had taken high exposure to mid-caps to boost their returns, they are now selling those stocks to turn compliant with the new norms.

Another reason is that political uncertainty is affecting sentiment. “Several state elections are due this year, and then we have the general elections next year. Many fund managers are sitting on cash because of the current volatility in the markets, and to see how things shape up politically. Some funds, such as value funds and dynamic asset allocation funds, allocate to equities based on market valuations. When valuations move high, they move into cash.

Many fund managers are also facing the problem of plenty. While the industry is receiving monthly inflows of Rs 75 billion through systematic investment plans, there aren’t many opportunities due to the high valuations in the midcap and smallcap segments. Even many large-cap stocks seem overvalued.

There are risks too

During the financial crisis of 2008, many fund managers had gone heavily into cash to prevent their funds from correcting deeply. However, when the markets rebounded in 2009, these funds were left on the sidelines. Their performance took a knock, and it took them several quarters to catch up with peers who were fully invested. After this, many fund houses introduced internal rules stipulating that fund managers should not gain more than five percent exposure to cash. When fund managers take high cash allocation calls, it implies that they are trying to time the market, a tricky thing for any fund manager to pull off consistently.”

When funds take large cash calls, it also skews the investor’s asset allocation. A simple example will help illustrate this point. Suppose that an investor wants 50 percent equity and 50 percent fixed income exposure in his portfolio. He invests the 50 percent in an equity fund. But the fund manager invests only 70 percent of his fund portfolio in equities. As a result, the investor’s equity allocation falls to 35 percent. This is a more conservative allocation than he desires and could affect his long-term returns. Asset allocation is best left to investors themselves.

Exceptions to this rule

While most equity funds should stay almost fully invested, dynamic asset allocation funds and value funds are exceptions. Dynamic asset allocation funds, as their name implies, take asset allocation calls, often based on a formula. When markets become expensive, as indicated by price to earnings (P/E) or price to book value (P/BV) ratio, they reduce allocation to equities, and vice-versa.

Value-oriented funds are the other exception. Quantum Long Term Equity Value Fund, for instance, doesn’t shy of parking a considerable portion of its portfolio in cash if the situation warrants. Says Atul Kumar, head-equity funds, Quantum Asset Management: “If we find value in stocks, we stay invested. But many of the stocks that we held reached the sell limit we had set for them, so we were forced to sell them. We are also finding fewer new opportunities. That is why our cash level has gone up. It is not a tactical call. It comes out of our bottom-up, process-driven approach.”

PPFAS Long Term Equity Fund currently has a cash allocation of 23.28 percent. Explaining the fund’s approach, Rajeev Thakkar, chief investment officer and director, PPFAS Mutual Fund says: “We don’t start off with any target cash position. Our objective is to deploy everything in equities. But if we find stocks worth investing in only up to 77 percent of our corpus, then 23 percent will be the residual cash that will lie around till we find suitable opportunities.”

Going into cash can prove advantageous in certain situations. Says Thakkar: “If there is a significant correction, the cash position could become a significant factor responsible for outperformance.” He adds that being in cash also gives the fund manager opportunities to buy stocks at attractive valuations when the markets or select stocks correct.

According to Radhika Gupta, CEO edelweissamc taking large cash calls in long only funds … something to avoid because it distorts the asset allocation of an investor, given they are investing in a relative return fund.

The SBI Small & Midcap Fund, which was suspended for new investments in October 2015, will reopen for fresh subscriptions through the systematic investment plan (SIP) mode from May 16. It will be called SBI Smallcap Fund and have an investment cap of ₹25,000 per month and per PAN card.

It is the first fund to reopen for fresh subscriptions after many smallcap funds had put restrictions on inflows because of rising inflows, higher valuations and lower investment opportunities. It was closed for a subscriptionsince it had a capacity constraint of ₹750 crore on its assets under management.

Following the introduction of new rules by the Securities and Exchange Board of India (Sebi) for rationalisation of mutual fund schemes, the fund will now fall in the smallcap category. The erstwhile SBI Small & Midcap Fund had emerged from the acquisition of the Daiwa Industry Leaders Fund by SBI in November 2013.

As per the new rules, a small cap fund can buy stocks beyond 251st stock in terms of market capitalisation. Prior to this, the scheme could buy small-cap stocks only beyond 401st stock in terms of market capitalisation. “These new norms give us 150 more stocks to choose from with higher market capitalisation and hence and we are in the final process of taking internal approvals for opening the scheme for SIPs only.

The fund, with assets of ₹770 crore, is managed byR Srinivasan and is among the best performing smallcap funds. In the past one year, it generated returns of 35.2 per cent, compared to the category average of 17.75 per cent. In the past five years, the fund returned an annualised 36 per cent, compared to the category average of 31.58 per cent. Investors have been flocking to mid-cap and small-cap schemes in the past three years owing to higher returns from such schemes. Several funds in these categories have placed restrictions on inflows because the available stocks are limited and liquidity is low. Reliance Small Cap Fund, L&T Emerging Business Fund, DSP Blackrock Small Cap Fund and Mirae Asset Emerging Bluechip Fund are some funds which have put restrictions on fresh lumpsum investments and SIP inflows into their schemes.

Disclaimer: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here.

Following these simple yet indispensable investment insights can save you a lot of regret and sleepless nights.

You don’t make money by watching TV:

There are many business-news channels now which claim that they help you make money. Ever wondered why they never advertise the track record of the recommendations they make? Or why they only seem to talk about the winning recommendations and not the losing ones? Or why they seem to talk about ‘global cues’ driving the stock market all the time?

Most of the business news TV is best for understanding things in retrospect. In fact, when the business TV wallahs don’t have a reason for what is driving the stock market, they say, ‘global cues’. Also, the short-term orientation of TV channels will essentially make your broker, and not you, rich.

You don’t make money by reading newspapers either:

All the business newspapers these days have a strong personal-finance as well as a stock-market section. But a lot of the analysis on offer is full of hindsight bias, i.e., they come up with nice explanations of things after they have already happened. Further, newspaper reporters can get analysts to say things that fit in with the headline that has already been thought of. Analysts are more than happy saying these things in order to see their name in the newspapers. And it is worth remembering that newspapers have space to fill. So they will write stuff even if the situation doesn’t demand it.

SIPs work best over the long term:

If you were to ask a typical fund manager about how long one should stay invested in an SIP, the answer usually is three to five years. Honestly, I think that is too low a number. I started my first SIP in December 2005. And more than ten years later, I am actually seeing the benefit of having invested for so long. Also, it is worth remembering that SIPs over the long term are about a regular investing habit which gives reasonable returns than the possibility of fabulous returns that one might earn by choosing the right stock. This is an important distinction that needs to be made.

I did this during the 2007-2008 period and lost a lot of money doing it. I think it’s best to stick to investing in good large and mid-cap funds which have had a good track record over a long period of time, instead of chasing the hottest fund managers on the block. The funds with the best returns in the short term (one to three years) keep changing, and there is no way you can predict the next big thing on the block; the point being, investing should be boring. If it is giving you an adrenaline rush, you are not doing the right things.

Endowment policies are not investment policies:

Endowment policies sold by insurance companies are a very popular form of investing as well as saving tax. One reason for this is because they are deemed to be safe. But have you ever asked how much return these policies actually give? If I can be slightly technical here, what is the internal rate of return of an average endowment policy in which an individual invests for a period of 20 years? You will be surprised to know that such data are not available. But from what I understand about these things, endowment policies give a lower rate of return than inflation. So why bother? Endowment policies are essentially a cheap way for the government to raise money, given that most of these policies end up investing the money raised in government bonds. That is all there is to it. If you want to finance the government, please do so, but there are better ways of earning a return on your investment.

ULIPs are unit-linked investment plans, essentially investment plans which come with some insurance. The trouble is if they are investment plans, why are there no past returns of these policies available anywhere? But what are ULIPs? I have put this question to many people, but I am yet to receive an answer. What is the best-performing ULIP over the last five years? No one has been able to give me that answer. This is not surprising, given how complicated the structure of an average ULIP is. Hence, if you want to invest indirectly in equity, it is best to stick to mutual funds.

Sensex/Nifty forecasts are largely bogus:

Towards the end of every year or even around Diwali, all broking houses come up with their Sensex/Nifty forecasts for the next year. Usually, these are positive and expect the index to go up. At the same time, they are largely wrong. You can Google and check. Hence, treat them as entertainment but don’t take them seriously. Stock brokerages bring out such forecasts because it is an easy way to get some presence in the media. Both TV and newspapers, for some reason I don’t understand, are suckers for Sensex as well as Nifty forecasts.

Don’t buy a home unless you want to live in it or have black money:

Much is made about excellent returns from property. The trouble is there are no reliable numbers going around. It’s only people talking from experience. But when people calculate property returns, they do not take a lot of expenses into account. Also, when people talk about property returns they talk about big numbers: ‘I bought this for `20 lakh but sold it for a crore.’ This feels like a huge return, but it doesn’t exactly take into account the time factor as well as loads of expenses and other headaches that come with owning property. Further, these days there are other risks like the builder disappearing or not giving possession for a very long time. This leads to a situation where individuals end up paying both EMI as well as rent. Also, property returns have been negative in many parts of the country over the last few years. And given the current price levels, I don’t think buying a home is the best way to invest currently.

In my earlier avatar as a journalist, one widely followed stock-market guru told a closed gathering of investors that Sensex would touch 50,000 level in six to seven years. He said it very confidently. Confident stock-market gurus make for good newspaper copy. I wrote about it and the story was splashed on the front page of the newspaper I worked for. It was October 2007. Nearly nine years later, the Sensex is at half of the predicted level. The point is that gurus might be good. They might have the ability to predict things in advance. But then, why would they give their insight to the media, and in the process, you, dear reader, for free? Remember this, next time you see a guru making a prediction.

This is something that many people don’t seem to understand. People want low interest rates on their loans, but they are not happy with low-interest rates on their deposits. Banks fund loans by raising fixed deposits. They can’t cut interest rates on their loans unless they cut interest rates on their deposits. It’s as simple as that. Nevertheless, I wonder why people can’t seem to understand this basic point.

Governments across the world are growing more and more socialist and development oriented. In India too, We have noticed that whenever the government has gone about focusing upon a part of the economy or a specific area, there has been long-term development followed by strong market returns for companies operating in that space.

IT and IT-enabled businesses saw a huge surge in 1990’s on the back of favorable govt policy environment and industry growth. 1st half of previous decade saw an emphasis on Infra development, and the 2nd part saw financials taking fore while consumption remained a consistent theme all through. With the new (present) government coming in, Manufacturing got the limelight in 2014 & onwards. All these themes have followed up with strong returns for their investors in the years following govt policy & push. Since its ascent to power, the present government has been reiterating its growth & development agenda through various initiatives and policy directives. Over the past couple of years, the narrative has been gradually shifting to a more grass-roots level financial inclusion & growth and a more sustainable policy environment for ensuring equitable development of the rural and urban economy.

Earlier ABSL launched the ABSL Banking & Financial Services Fund in December 2013, and it proved to be the best performing fund in the pack since that time (generated 30% p.a. vs ~24% p.a. by Nifty Financial Services Index since inception). January 2015 ABSL was launching the ABSL Manufacturing Fund which has delivered 12.9% p.a. vs S&PBSE 500’s 9.4% p.a. As a fund house, other investment calls have also delivered similar performances and are quite visible in the performance of the close-ended series (Resurgent India & Emerging Leaders) where Fund house bet on Small & Midcap in one series and GST theme in another. Almost all series have delivered significant alpha (in range of 2% – 6% p.a.) while being true to mandate.

With a similar moment in the making for Rural Transformation, ‘Ujjwal Bharat’ is the new investment destination of choice. Fund house believes that this theme is a multi-year theme and a strong return generator too. With a power packed team of Satyabrata Mohanty & Milind Bafna (we all know the past few years of superlative performance of ABSL Advantage Fund & ABSL Pure Value Fund) under the aegis of Mahesh Patil.

With the recent tailwind of Union Budget 2018, the government has announced its intent of transforming farmlands of the country into the new Urban! Let’s take advantage of this opportunity.

Salient Features of the NFO:

A theme of the fund is geared to benefit from the most significant focus area of the government – Ujjwal Bharat; Huge infra spend & ambitious initiatives by the govt will trigger a cascading effect to a lot of focus areas as well as allied sectors.

Distinctive portfolio strategy to find rerating opportunities across the value chain of the sectors identified.

A multi-year theme that will continue to benefit from the strong growth already witnessed by companies across the beneficiary sectors – higher ROE / EPS growth / Sales growth.

Complements current investor portfolios with a differentiated theme

Correction in markets have already brought valuations to reasonably fair levels across the board

As a fund house, ABSL believes that while there are so many growth drivers for these, will result in rerating for many theme related companies, the unique portfolio strategy of considering 2nd & 3rd order beneficiaries of rural growth for investment will deliver that extra punch in the returns. Sectors like Auto & Auto Ancillaries, Building Materials, Banks & NBFCs, Consumer Staples & Durables, & Agri Inputs are some of the key sectors, where fund house see these potential multi-bagger opportunities.

Scheme objective: The investment objective of the scheme is to provide capital appreciation by investing primarily in equity and equity-related securities that are likely to benefit from recove in the Indian economy.

The Scheme does not guarantee/indicate any returns. There can be no assurance that the schemes’ objectives will be achieved.

The scheme may invest up to 20% of the net assets of the scheme in derivative instruments.

Fund Manager:Mr. Satyabrata Mohanty & Mr. Milind Bafna

Mr. Satyabrata Mohanty: Mr. Mohanty is a B.Com (H), Chartered Accountant and CFA. He has been part of Birla group since last 17 years. He has over 12
Years of experience in Finance and Research. He has handled responsibilities across Fund Management (Equity & Debt), Trading and Credit Research functions. Prior to joining BSLAMC, he has worked with Aditya Birla Management Corporation Ltd & joined ABG
as a Management Trainee.

Indian economy has turned the corner and is possibly out of the low growth high inflation cycle. The macro trend for the year FY16 has been encouraging with key macro indicators like Current Account Deficit (CAD), Inflation and Foreign Institutional Investor (FII) flows showing improvements.

The term emerging markets symbolizes innovation lead evolution of the marketplaces, India being the fastest growing among EMs becomes the best bet globally.The concern on re-allocation of capital from India to China has subsided post the crash in Chinese equity markets.

In fact, India stands tall as one of the strongest EMS in terms of flows, investor confidence, and performance. We can assign a decent probability to reverse inflows owing to India’s position among the EMs.

The global markets are slowly recovering, India too is set to deliver excellent growth in the medium to long term owing to strong, stable government, improving macros & supportive global sentiment. In addition to this institutionalization of finances by means of demonetization & implementation of GST is likely to result in better capacity utilization & improved earnings for Indian corporates.

With the implementation of GST, the tax advantage enjoyed by the unorganized sectors will be reduced significantly & cost of production will go down resulting in the better capacity utilization & growth of the formal economy.

The government has come up with numerous initiatives like ‘Make in India’, ‘Digital India’,‘Financial Inclusion’ etc. that have supported domestic growth as well.

Demonetization has institutionalized the finances further from here the implementation of GST is expected to result in better governance and higher revenue for the government; thus govt.spending in the economy is likely to increase.

Fund house believes in the current scenario; the 8 R’s would be driving the return from equities. Reflation trade taking a bit of set back getting flows back to India, Republicans providing checks and balance for Trumponomics, Remonetization of currency leading to normalization of growth, Rates getting transmitted into the system, Reform process to continue from the government, stability of the Rupee, hopefully a good Rainfall and most importantly Rebound in earnings. These 8 Rs would lead to the most import R which is Returns in the market.

Risk factors:

Mutual Funds and securities investments are subject to market risks, and there can be no assurance or guarantee that the objectives of the Scheme will be achieved.

Disclaimer:No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here.

In a frequently-asked-question series released on 5th Feb 2018, the Central Board of Direct Tax (CBDT) has given four different scenarios to calculate long gains tax on mutual funds.

Let us look at the scenarios:

Scenario 1: If Mr. X has bought an MF unit on November 15, 2016 at Rs.100, its fair market value is Rs.200 on January 31, 2018, and he has sold it on April 1, 2018 at Rs.250. As the actual cost of acquisition is less than the fair market value as on January 31, 2018, you will have to take the fair market value of Rs.200 as the cost of acquisition and the long-term capital gain will be Rs.50 (Rs. 250 – Rs.200).

Scenario 2: Again, if Mr.X has acquired an MF unit on November 15, 2016 at Rs.100, its fair market value is Rs.200 on January 31, 2018, and it is sold on April 1, 2018 at Rs.150. In this case, the actual cost of acquisition is less than the fair market value as on January 31, 2018. However, the sale value is also less than the fair market value as on January 31, 2018. In such a case, you will have to take the sale value of Rs.150 as the cost of acquisition and the long-term capital gain will be NIL (Rs. 150 – Rs. 150).

Scenario 3: An MF unit is acquired on November 15, 2016 at Rs.100, its fair market value is Rs.50 on January 31, 2018, and it is sold on April 1, 2018 at Rs.150. In this case, the fair market value as on January 31, 2018 is less than the actual cost of acquisition, and therefore, the actual cost of Rs.100 will be taken as actual cost of acquisition and the long-term capital gain will be Rs.50 (Rs. 150 – Rs. 100).

Scenario 4: An MF unit is acquired on November 15, 2016 at Rs.100, its fair market value is Rs 200 on January 31, 2018, and it is sold on April 1, 2018 at Rs.50. In this case, the actual cost of acquisition is less than the fair market value as on January 31, 2018. The sale value is less than the fair market value as on January 31, 2018 and the actual cost of acquisition. Therefore, the actual cost of Rs.100 will be taken as the cost of acquisition in this case. Hence, the long-term capital loss will be Rs.50 (Rs. 50 – Rs. 100) in this case.

Such a loss can be set-off against any other long-term capital gains and you can carry it forward to subsequent eight years for set-off against long-term capital gains.

Budget talks about Rs.1 lakh exemption. How is this to be calculated?

Long-term capital gains realised from all transactions under sale of equity shares and equity MF schemes during the financial year will be aggregated. For example, if the total of the long-term capital gain is at Rs.2 lakhs in the financial year, then the investor has to pay LTCG tax of 10% on Rs.1 lakh only.

What is grandfathering?

Grandfathering means the exemption granted to investors on the gains made by them before the new provisions come into force. This is more of a comfort clause while migrating from an easier to a strict tax regime. The government intends to grandfather or exempt gains made until January 31, 2018.

It is Close Ended Equity Scheme Investing Across large,mid and small cap stocks in Recently 2-3 years listed IPO’s and Upcoming IPO’s.

Since IPO-Initial Public Offering Activity has picked up in recent years with over Rs.1,00,000 cr being raised in last 2 years. Robust IPO activity has created multiple maiden investment opportunities.

This fund is first of its kind in the industry that intends to follow a disciplined approach while investing in recent and upcoming listings.The aim is to make investing in such maiden ideas accessible and simpler for retail investors.

Investing in India’s Prospective Opportunities(IPO) is the mantra of this NFO.

New Sectors Such as Insurance, Diagnostic, Staffing Solutions,stock exchange & Depository, Retail and Asset Management Company are being introduced offering unique Opportunities to play India’s growth story.

The benchmark for the Scheme is NIFTY 200 Index. The performance of the Scheme would be bench marked with NIFTY 200 Index since it is in line with the investment objective and this reflects the primary universe of stocks from where the portfolio would be constructed by the fund managers.

INVESTMENT MANAGER:

Edelweiss Asset Management Limited

Registar:

Karvy Computershare Private Limited.

The AMC / Trustee Company reserve the right to revise the load structure from time to time. Such changes will become effective prospectively from the date such changes are incorporated.

Since the fund having lock-in of 3.5 years. It provide fund manager time to perform him expertise.

Risk factors associated with investment in ADRs/GDRs and Foreign Securities.

Risk Factors Associated with Derivative.

Risk factor specifically while using Options (non arbitrage), Risks attached with the use of debt derivatives.

Risk Associated with Securitized Debt.

Risks Associated with Stock Lending & Short Selling.

Risks Associated with Trading of Units on Stock Exchange.

Risk associated with Close Ended Scheme.

Information about the scheme:

Investment objective:

The investment objective of the Scheme is to seek to provide capital appreciation by investing in equity and equity related securities of companies which are new in the sector, early in their growth stage and are poised to benefit from the India growth story in the long-term.

However, there is no assurance that the investment objective of the Scheme will be realized and the Scheme does not assure or guarantee any returns.

Asset allocation and investment pattern:

Under normal circumstances, the anticipated asset allocation under each Series of the Scheme, will be as follows:

Indicative Allocation

(% to net assets)

Risk Profile

Equity and Equity

related instruments including derivatives

65% to 100%

Medium to High

Debt and

money market instruments

0% to 35%

Low

The Scheme will not invest in credit default swaps.

Investment in Securitized Debt will be up to 50% of debt allocation.

Investment in ADRs/ GDRs/ Foreign Securities, whether issued by companies in India and foreign Securities, as permitted by SEBI Regulation, can be up to 35% of the Net Assets of the Scheme.

The Scheme may, if the Trustees permit, engage in short selling of securities in accordance with the framework relating to short selling and securities lending and borrowing specified by SEBI. The Scheme shall not deploy more than 20% of its net assets in stock lending and not more than 5% of the net assets of the Scheme will be deployed in Stock lending to any single counter party.

The Scheme may invest in derivatives up to 50% of the Net Assets of the Scheme.

The cumulative gross exposure through equity, debt and derivative positions should not exceed 100% of the net assets of the Scheme. The exposure to Derivatives mentioned as a percentage to the Net Assets means Gross Notional Exposure.

Cash or cash equivalents with residual maturity of less than 91 days will be treated as not creating any exposure.

Portfolio Re balancing.

Investment in CBLO before the closure of NFO.

Where will the scheme invest?

The corpus of the Plan under the Scheme shall be invested in any (but not exclusively) of the following securities:

The AMC may park the funds of the Plan in short term deposits of scheduled commercial banks, subject to the guidelines issued by SEBI vide its circular dated April 16, 2007, as amended from time to time.

Investment in Securitised Debt.

The investments in Securitised debt papers including Pass through Certificates (PT/Cs) may be made upto 35% of the net assets of the Scheme. Securitization is a structured finance process, which involves pooling and repackaging of cash-flow producing financial assets into securities that are then sold to investors.

The Scheme will be a diversified equity fund which will invest in equity and equity related securities of the companies that are new in the sector, early in their growth phase and are likely to benefit in the long term from the macro and demographic aspects of the Indian economy.

The Fund will invest in a diversified basket of equity stocks spanning the entire market capitalization spectrum and across multiple sectors with special focus on companies that are newly introduced in the market and are unique businesses The Fund would identify companies for investment, based on the following criteria amongst others:

Track record of the company

Potential for future growth

Industry economic scenario & its outlook

The fund manager proposes to concentrate on business and economic fundamentals driven by in-depth research techniques and employing the potential of the research team at the AMC.

Key to the manager’s investment strategy is the identification of triggers for potential appreciation of stocks in the universe over the medium to long term time frame. As and when the fund manager is of the view that a specific investment has met its desired objective, the investment maybe liquidated.

The Scheme may also use various derivatives and hedging products from time to time, as would be available and permitted by SEBI, or in an attempt to limit the downside risk of the portfolio.

The Scheme may invest in other schemes managed by the AMC or in the schemes of any other Mutual Funds, provided it is in conformity with the investment objective of the Scheme and in terms of the prevailing Regulations. As per the Regulations, no investment management fees will be charged for such investments. As per the SEBI Regulations, such inter-scheme investments shall not exceed 5% of the Net Asset Value of the Fund.

Derivative & Arbitrage Strategies

Derivatives are financial contracts of pre-determined fixed duration, whose values are derived from the value of an underlying primary financial instrument, or index, such as: interest rates, exchange rates, and equities.

Cash Future Arbitrage.

Illustrations

Buy 100 shares of Company A at Rs 100 and sell the same quantity of stock’s future of the Company A at Rs 101.

Market goes up and the stock end at Rs 200.

At the end of the month (expiry day) the future expires automatically:

Settlement price of future = closing spot price = Rs 200

Gain on stock is 100*(200-100) = Rs 10,000

Loss on future is 100*(101-200) = Rs – 9,900

Net gain is 10,000 – 9,900 = Rs 100

Market goes down and the stock end at Rs 50.

At the end of the month (expiry day) the future expires automatically:

Disclaimer:No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here.